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insulation under siding?

I currently have old, damp, asphalt siding with holes in it. I am looking to replace it with vinyl (though am open to other ideas to maintain the look of my 100 year old twin). Everyone says something different about what to put up underneath it. Tyvek? Extruded polystyrene that will let the wall breathe? Foam insulation with a moisture barrier (on the cold in winter side to keep water out of the wall)?

Keep in mind, I also have a damp, moldy basement whose air is in contact with the channels in the wall.

HELP!

vinyl sidingI live in the New York metro area and am planni...3 REPLIES